3PLs will reinvent themselves to meet needs of global supply chains

The 3PL (third-party logistics provider) of the future will be more global, concentrated, segmented around customer types and universally better at execution, predicts Tig Gilliam, partner, global supply chain management leader with IBM Business Consulting Services. “The payoff for customers is extensive, including greater reliability, lower total costs, consistent global capabilities and deeper integration with buyers and partners.”

According to a new report from IBM, as logistics outsourcing continues to grow, customers will continue to seek greater reliability at a lower total cost. Simultaneously, as higher performance from greater end-to-end integration becomes more attainable, some buyers will need above average and wider capabilities – moving beyond traditional execution level services to the historically untouchable planning and control activities. These users are also concluding that to realize the full scope of potential trade-offs, such as spending more on transport and storage to get lower inventory costs and higher service levels, they need to move to fewer, bigger contracts allowing for more scale economies.

As this trend continues it will create a significant gap between buyer needs and provider capabilities. This gap will require many traditional logistics providers to choose to either reinvent themselves with the prospect of higher margins, or continue to serve commodity buyers – at lower margins.

The small number of innovative providers that choose to reinvent themselves will emerge as synchronized providers offering end-to-end supply chain integration, visibility, synchronization and broad-based business process capabilities for global customers. They will establish de facto process and technology standards – or reinforce acceptance of existing ones for “plug and play” implementations. More specifically, these processes could include supplier management, procurement, contract manufacturing, logistics services, global trade financial and tax management, performance management and customer service. This group could represent up to 5% to 10% of market volume.


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